When to Pay for Damages out of Pocket

When you have a minor accident for which you were at fault or your vehicle incurs minor damages not related to an accident, filing a car insurance claim may not be the wisest strategy financially. Specifically, filing collision or comprehensive claims for damages of $1,000 or less usually will end up costing you more money in the long run with the disappearance of inexpensive car insurance. Read on to find out when you will actually save money by avoiding a claim and paying for the damages yourself.

Account for Deductibles

Damages of $1,000 or less are typically not worth an auto insurance claim because once your deductible is subtracted from the repairs, you receive a very small settlement, if any. For example, say a tree branch falls on your vehicle and causes $700 of damage. Your car insurance policy includes comprehensive coverage with a $500 deductible. If you file a claim, you would only receive a settlement of $200 after you pay your portion of the costs. When the difference between your deductible and the amount of the damages is relatively small, it’s best to pay for the repairs out of pocket.

Factor in Rate Hikes

If you file a collision or comprehensive claim, your insurer will eventually raise your premiums. In most states, insurers have the right to raise your auto insurance rates for up to three years after a claim. For damages of less than $1,000, filing an insurance claim will likely end up costing you more in additional future premiums than it saves you in immediate repair costs. If you can afford to pay for the repairs out of pocket, you can avoid a rate hike by doing so.